West Texas Intermediate crude rose on speculation that central banks will bolster stimulus after more Americans than projected filed for unemployment benefits and U.S. consumer prices decreased.
Futures climbed 0.9 percent as Labor Department figures showed that jobless claims exceeded all forecasts in a Bloomberg survey of economists. The U.S. cost of living fell in April for a second month. St. Louis Federal Reserve President James Bullard said last month that persistent disinflation may require the central bank to provide additional stimulus. The dollar slid after the U.S. economic headlines, bolstering oil.
“The market came roaring back after what were bearish headlines,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Negative news is being taken as a sign that the easy-money policies of the central banks will continue.”
WTI oil for June delivery advanced 86 cents to settle at $95.16 a barrel on the New York Mercantile Exchange. The volume of all contracts traded was 28 percent above the 100-day average at 3:34 p.m.
Brent crude for June settlement, which expired today, rose 12 cents to end the session at $103.80 a barrel on the London-based ICE Futures Europe exchange. The more actively traded July futures increased 28 cents, or 0.3 percent, to settle at $103.78 a barrel. Volume for all contracts was 3.6 percent greater than the 100-day average.
The European benchmark crude traded at a $8.64 premium to WTI at the close of trading today, down from $9.38 yesterday. The spread dropped to $7.65 at settlement on May 13, the narrowest level since January 2011.
Jobless claims jumped by 32,000 to 360,000 in the week ended May 11, the most since the end of March, data showed. A Commerce Department report showed that housing starts slumped 16.5 percent to an 853,000 annualized rate. The median estimate of 81 economists surveyed by Bloomberg was for a 970,000 rate.
“It appears that there’s a lot of short-term trading activity,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “Trading often seems at odds with the fundamentals of the market, but that doesn’t matter if someone is only planning to hold on to the contract for a short time.”
The consumer-price index decreased 0.4 percent, the biggest drop since December 2008, after falling 0.2 percent in March, according to the Labor Department.
A weaker U.S. currency increases the appeal of dollar-denominated raw materials such as oil as an investment. The Dollar Index, which tracks the U.S. currency against those of six major trading partners, fell as much as 0.5 percent, and is heading for the first decline in six days.
“The dollar dropped as soon as the jobs report came out and crude oil rallied,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “The correlation between the dollar and oil has tightened over the past week, after loosening for a while.”
The Energy Information Administration said yesterday that U.S. crude stockpiles fell 624,000 barrels to 394.9 million last week. Supplies in the week ended May 3 were at the highest level since 1931, according to the EIA, the Energy Department’s statistical arm.
Refineries operated at 88 percent of capacity in the seven days ended May 10, the most since the week ended Jan. 4, the EIA said. Units often restart in the spring after performing maintenance before gasoline demand peaks in summer.
“We’re heading for a seasonal uptick in demand,” said Julius Walker, global energy markets strategist at UBS Securities LLC in New York. “Refineries in the U.S. are going to be increasing gasoline output and the Saudis will be burning more for power.”
Oil consumption increases in the Middle East during the summer months as it is burned for electricity generation to run air conditioners.
Libya’s Zueitina oil export terminal shut because of protests, Deputy Oil Minister Omar Shakmak told reporters in Tripoli today. The country’s output rose 30,000 barrels a day to 1.43 million in April, a Bloomberg survey showed.
“The supply picture isn’t that encouraging outside of the U.S.,” Walker said. “The closure of the Libyan port because of protests is a worrying sign. There are still disruptions in Nigeria and I’m waiting for any sign of tankers in the Red Sea to pick up barrels from South Sudan.”
The Movement for the Emancipation of the Niger Delta said on April 3 it would resume attacks in Nigeria after its suspected leader, Henry Okah, was sentenced to 24 years in prison in South Africa on terrorism charges.
South Sudan ended a 15-month shutdown of crude production last month. The country stopped pumping crude in January 2012 after accusing neighboring Sudan of stealing $815 million of its oil, which Sudan said it took to recover unpaid transport and processing fees.
Implied volatility for at-the-money WTI options expiring in July was 21.2 percent compared with 21.3 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 635,184 contracts as of 3:35 p.m. It totaled 743,328 contracts in the previous session, 28 percent above the three-month average. Open interest was 1.76 million contracts.